The administrators of Communisis have revealed it left a deficit in excess of £200m.
The Leeds communications group went into administration in December last year, with parts of it acquired by Paragon – saving 581 jobs, but 638 staff were made redundant.
Interpath Advisory, which was appointed as its administrators, has published a statement of affairs for 4 Communisis companies – Communisis Ltd, Communisis UK Ltd, Communisis Digital Ltd and Communisis Data Intelligence Ltd.
According to the newly released data on Companies’ House:
Communisis Ltd had a total deficiency of £258.339m, with unsecured creditors owed £60.3m.
Communisis UK Ltd’s total deficiency was £243.951m and a list of unsecured creditors covers 4 pages and totals £96.4m.
Communisis Digital Ltd’s total deficiency was £164.5m and unsecured creditors totals £23.4m.
Finally Communisis Data Intelligence’s total deficiency was £175.89m and unsecured creditors totals £38.1m.
The biggest trade creditors are HMRC, Tech Mahindra and banks – Lloyds (£11m), Nationwide (£4.7m), TSB (£2m). The banks, along with Zurich and Axa came up with £21m last year in order to keep the company going.
However, to slightly complicated matters, there are loans and investments between the 4 Communisis companies.
Until 2018, Communisis was a publicly listed company. It delisted when it was acquired by US payment solutions firm, OSG Bidco for £154m.
However, in 2023, OSG Holdings filed for Chapter 11 bankruptcy protection (its second time in 14 months) and Communisis confirmed it was in talks with a number of potential bidders.
At the time OSG said that as part of the protection it would be exiting the “Communisis business.”
It was at this stage that major customers were asked to come up with the £21m to keep the business going. But that facility came to an end on 28th December – which is when Communisis called in the administrators.
Interpath has also published an in-depth SIP16 memorandum which goes into further detail.
Communisis Group is made up of 2 main divisions – Customer Experience and Brand Deployment. There were also the smaller Agencies and Editions part of the group, which sit in numerous subsidiaries under Communisis Limited, Communisis UK Limited and Communisis Data Intelligence Limited.
Communisis’ CE business was “adversely affected by the Covid-19 pandemic, with sales reducing materially from 2020 onwards as a seismic shift toward digitisation accelerated more quickly than forecast. This downturn in performance was exacerbated by constraints placed on certain customer budgets, as organisations sought to recover from the global pandemic,” wrote the administrators.
“In 2022, as the post-Covid environment started to stabilise, CE embarked on a site rationalisation programme to reduce overheads and drive efficiencies, whilst commencing a highly technical digital transformation programme.”
However, it continued to face challenges, including “inflationary cost rises and an industry-wide decline of volumes as firms continued their migration to digital.”
In early 2023, OSG marketed Communisis’ Customer Experience (CE) operation for sale to seek “a strategic partner who could provide the additional funding needed to support the business through its next phase of stabilisation and growth.”
At the end of March, two of three parties “declined to explore the opportunity further.” With only Paragon left – the company initially provided a solvent offer for the CE business for £1 – inclusive of the Pension Scheme.
However, according to the administrators’ report:
“it became apparent during this period of diligence that Paragon’s offer was likely to reduce in value. Therefore, the prospect of including Brand Deployment (BD) in the transaction perimeter was introduced at a management presentation on 17 May 2023.
“In response, Paragon provided an updated offer on 30 May 2023 of £1 to acquire the CE and BD business, including the pension scheme.
“The Group decided to consider the independent sale of the BD business given there was only one party willing to consider an acquisition of the group, and to ensure competitive tension was maintained.”
This led to widening the sale process to 36 additional organisations. 8 of these (including Paragon) entered the first round. By July, and the second round, only 4 remained.
On 31st October, there were 4 offers on the table
2 for the group;
1 for the Customer Experience business;
1 for the Brand Deployment business.
In November, there were 2 final offers:
- The Purchaser (Paragon): Fixed price of £26.9m consideration for the acquisition of certain CE trade and certain assets of the Companies and a solvent purchase of the BD and Agencies and Editions shares. Expected completion in December 2023.
- Party B: £36.7m enterprise value for the solvent acquisition of BD (incl. Agencies) shares only. At the time of offer the estimated net debt deductions totalled £6.7m and was subject to further downwards movement related to leakage provisions until completion, expected in late January 2024 / early February 2024.
While the Party B offer was more, there were specific concerns, not least the completion date, as liquidity couldn’t be assured into 2024.
In the end Mike Pink and Steve Absolom from Interpath Advisory were appointed Joint Administrators of Communisis Limited on 28 December 2023. Absolom and James Clark from Interpath Advisory were also appointed as Joint Administrators of Communisis UK Limited, Communisis Digital Limited and Communisis Data Intelligence Limited.
Immediately after their appointment, they completed the sale of the shares of the BD business and certain assets of the CE business to Paragon Customer Communications.
The “certain assets of the CE business” is primarily for the delivery of services for Lloyds Banking Group. This will see Paragon managing over 100 million communications to and from the bank’s customers annually.
581 jobs were saved, but 638 staff were made redundant.
The joint administrators stated in conclusion:
“In our opinion, the Purchaser provided the most deliverable offer and best price reasonably obtainable in the circumstances. The Joint Administrators of the Companies are satisfied that the marketing process was extensive and robust in the timescales available. The offers were discussed with the secured lender and key stakeholders, who were supportive of proceeding with the offer from the Purchaser. As such, this pre-pack transaction was progressed to completion.”